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Graduated interest: act fast to lock in rates
College costs keep spiraling upward, and now the cost of borrowing to pay for higher education is about to spike, too.
Students and their parents have taken comfort in a half-decade of ultra-cheap college loans, loading up on debt to cover the bills. About 8 million people borrowed $60 billion this year in education loans issued or guaranteed by the federal government. Now only those who act quickly will be able to keep a lid on the cost of that debt.
A combination of rising interest rates and legislative changes to the student loan program will alter the student loan landscape on July 1. Rates on existing Stafford loans — the bedrock government-guaranteed student loans that 44 percent of full-time undergraduates rely on to pay tuition bills — change annually and are pegged to 91-day Treasury bills.
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Federal loan rates face changes
After Saturday, college students at OSU and across the country will no longer be able to secure a federal loan at the current interest rates. Rates on the Stafford and Parent PLUS loans are set to increase by 2 percent, with the rates on Stafford subsidized and unsubsidized loans increasing from a variable of 4.7 percent to a fixed rate of 6.8 percent, and the Parent PLUS loans increasing from a variable rate of 6.1 percent to a fixed 8.25 percent. These loans can be bundled into one consolidation loan and secured at a lower fixed interest rate of 4.7 percent. In order to minimize the number of students repaying loans at higher interest rates, the federal government is allowing students to consolidate their federal loans while they are still in school. Students who are currently enrolled at any accredited institution have the option of applying for a Direct Consolidation Loan from the U.S.